The Indian economy is growing strongly, and will
continue to provide a conductive macro-environment for the industry to grow in.
The government is increasing spend on healthcare;
and the Indian population is spending an increased amount of money on healthcare
as a percentage of disposable income.
The disease profile is changing with an increase in
acute diseases along side growth of chronics.
Health insurance is growing
While the Medical Technology Industry is different
than “Pharma” in many ways , a look at the potential of India’s domestic Pharma
market will certainly give insight into the future scenario for the potential
for Medical Device Industry in India.
The recent CII-PwC Report on “India Pharma Inc. –
Capitalising on India’s Growth Potential” released at the “Pharma Summit 2010”,
analyses the immense potential of India’s domestic Pharma market, which was
valued at approximately US$12 billion in 2010, and showed a strong growth of
21.3% for the twelve months ending September 2010. PwC estimates that over the
next 10 years, the domestic market will grow to US$49 billion – a compounded
annual growth rate (CAGR) of 15%, with the potential to reach US$74 billion – a
CAGR of 20%, if aggressive growth drivers kick in.
One of the reasons behind this expected growth rate
is that India’s pharmaceutical industry has a favourable macro-environment to
grow in. The Indian economy has rebounded from the global economic downturn,
with real gross domestic product (GDP) growth reaching 9.66% in 2010.The Indian
middle class is also expanding rapidly, with affordability of medicines
increasing, and an increased percentage of disposable income being spent on
healthcare. The government has made public healthcare one of its top priorities
by launching policies and programs that are aimed at making healthcare more
affordable and accessible, especially in rural markets.
The industry is witnessing trends such as
acquisition activity, increasing investment, deeper penetration into the tier I
to tier VI and rural markets, growth in insurance coverage and innovation in
healthcare delivery. Taken together, these trends are leading to increased
affordability of services to patients and access to quality medical care. We
believe these trends, along with the favorable macro environment will propel the
industry to the next level of growth.
Rural Markets – A Huge Opportunity
Currently, around 67% of India’s population, or 742
million people live in rural areas , but rural markets contribute to only 17% of
the overall market’s sale. This represents a huge opportunity for pharmaceutical
companies, as we expect these markets to be the future growth drivers for the
Top Indian and foreign companies will look to
increase their market share by entering into strategic alliances, strengthening
their sales forces and increase penetration into newer markets.
Macro Factors Pushing The Industry
The Growing Indian Economy
The Indian economy is growing fast, and is valued at
US$1.430 trillion in 2010. GDP growth, calculated on a Purchasing Power Parity
basis reached 9.66% in the year 2010, and the International Monetary Fund (IMF)
expects it to remain consistently above 8% till 2015. Furthermore, India’s share
in the world GDP has been steadily increasing, and is expected to reach 6.28% in
2015, up from 4.17 in 2005.
Growing Middle Class With Higher Purchasing Power
India’s population is currently just over 1.1
billion and is projected to rise to 1.6 billion by 2050 – a 45.5% increase that
will see it outstrip China as the world’s most populous state. Besides, India
has a huge middle class population (households with annual incomes of US$4762 to
US$ 23,810 at 2001-02 prices), which has grown rapidly, from 25 million people
in 1996 to 153 million people in 2010. If the economy continues to grow fast and
literacy rates keep rising, around a third of the population (34%) is expected
to join the middle class in the near future. The middle class population is
rapidly acquiring the purchasing power necessary to afford quality western
medicine due to an increase in disposable income. The Indian population spent 7%
of its disposable income on healthcare in 2005; this number is expected to
nearly double, to 13%, by 2025.
Changing Disease Profile
The Indian population is experiencing a shift in
disease profiles . Traditionally, the acute disease segment held a significant
share of the Indian pharmaceutical market. This segment will continue to grow at
a steady rate, due to issue relating to public hygiene and sanitation. But, with
increase in affluence, rise in life expectancy and the onset of lifestyle
related conditions, the disease profile is gradually shifting towards a growth
in the chronic diseases segment. India has the largest pool of diabetic patients
in the world, with more than 41 million people suffering from the disease; this
is projected to reach 73.5 million in 2025.
IMS Health indicates that some of the fastest
growing therapeutic segments in the Indian Pharma space today are chronic
disease-related therapeutic segments. The anti-diabetic segment grew 29% in the
12 months ending July 2010. Cardio-vascular-medication and nervous system
disorder medication grew at 22% for the same period of time, indicating rapid
The growing size of the Indian geriatric population
will be a key factor in influencing the growth of the chronic segment. By 2028,
an estimated 199 million Indians will be age 60 or older, up from about 91
million in 2008.(9)
The Indian government has been making efforts to
improve nationwide provision of healthcare. It has launched policies that are
• building more hospitals
• boosting local access to healthcare,
• improving the quality of medical training,
• increasing public expenditure on healthcare to 2-3% of
• GDP, up from a current low of 1%.(14)
India’s healthcare insurance industry is currently
very small and limited, but is expected to grow at a CAGR of 15% till 2015.
Around of 80% of India’s healthcare expenditure is financed out of pocket. This
limits the propensity of Indians to spend on healthcare, particularly in lower
and middle income groups which comprise around 95% of population.(8)
(Ref: CII – PwC Report on “ India Pharma Inc. :
Capitalising on India’s Growth Potential” released at “Pharma Summit 2010” held
on Nov. 27, 2010 at Ahmedabad )